U.S.EDUCATION > The U.S. Education System > Overview > U.S. Department of Education Budget Summary and Background Information

Fiscal Year 2007 Budget Summary — February 6, 2006

You've got to know math if you're going to compete in this 21st-century world.

President George W. Bush
January 9, 2006

Section I. Summary of the 2007 Budget

Four years after the enactment of the No Child Left Behind Act (NCLB), the revolutionary changes to our education system called for by President Bush are almost implemented. States have put in place rigorous new accountability systems and will implement reading and math assessments covering all students in grades 3-8 by the end of the current 2005-06 school year. Improved data collection and reporting on teacher qualifications are helping States to ensure that all teachers are highly qualified. School districts are providing new support and assistance to low-performing schools, while making available public school choice and supplemental educational service options to millions of students who attend those schools.

The latest results of the National Assessment of Educational Progress (NAEP), better known as "The Nation's Report Card," show that these changes are paying off in the only way that counts: improved student achievement. Long-term NAEP trends show that America's 9-year-olds have made more progress in reading over the past five years than in the previous two decades, and the achievement gaps between African-American and Hispanic 9-year-olds and their white peers are at an all-time low. Importantly, NAEP also shows that students in large urban school districts—those most likely to be served by NCLB programs—have made larger achievement gains than the national average.

Despite this progress in the early grades, NAEP results for older students provide a reminder of the need to hold fast on the "bright line" principles of NCLB—annual assessments in grades 3-8, disaggregation of data for key subgroups, and proficiency for all students in reading and math by 2014—and the challenge of ensuring continued US prosperity in a globally competitive, technology-based economy. The 2005 NAEP math results for 8th-graders, for example, are both illustrative and alarming: less than one-third of 8th-graders, and just 13 percent of low-income 8th-graders, scored at the proficient level or above. If, as the President says, "you've got to know math if you're going to compete in this 21st century world," US math instruction clearly needs to kick into a higher gear, and this is a key goal of the President's 2007 Budget for Education.

For 2007, the President is requesting $54.4 billion in discretionary appropriations for the Department of Education, a decrease of $3.1 billion, or 5.5 percent, from the 2006 level. Even with the proposed decrease, discretionary appropriations for the Department will have grown by almost $12.2 billion, or 29 percent, since fiscal year 2001.

Key increases in the 2007 budget include the following:

• $380 million in new funding to improve math and science instruction in K-12 schools, requested as part of the President's American Competitiveness Initiative.

• Nearly $1.5 billion for a renewed High School Reform proposal designed to more thoroughly extend NCLB principles to the high school level and ensure that all students, including low-achieving students most at risk of dropping out, graduate with the knowledge and skills needed to succeed in postsecondary education or the globally competitive workplace.

• $35 million in new funds for the Department's portion of the President's multi-agency National Security Language Initiative, which in addition to contributing to national security would help US citizens compete in the global marketplace.

• $100 million for a new program of America's Opportunity Scholarships for Kids, which would provide new educational options for low-income students attending schools identified for restructuring under NCLB.

• $200 million in new Title I School Improvement Grants to build State capacity to turn around schools and LEAs identified for improvement, corrective action, or restructuring under the Title I Grants to Local Educational Agencies program.

In addition to competitiveness, a driving theme of the 2007 request is to continue to restrain Federal spending and stay on track to meet the President's goal of cutting the deficit in half by 2009. The overall 2007 request—including both discretionary and mandatory funds—combines fiscal discipline with strong, continued commitment to longstanding priorities such as Title I Grants to Local Educational Agencies, Special Education Grants to States, and Pell Grants for postsecondary students. At the same time, the budget proposes to eliminate 42 duplicative or unnecessary programs, for a total savings of $3.5 billion. While many of these proposals are repeated from prior years, Congress showed in the fiscal year 2006 appropriations process that it was willing to work with the President to achieve meaningful decreases in programs that are lower priority or do not work well in achieving their objectives. For example, the 2006 appropriations bill contained $1.4 billion in program reductions, including the elimination of five programs.

Discretionary and mandatory components of the request are shown below:

Total Department of Education Appropriations
(in billions of dollars)

	2005	2006	2007 Request
Discretionary	$56.6	$57.6	$54.4
Mandatory	17.4	31.3	9.0
Total	74.0	88.9	63.4

Department discretionary spending in fiscal year 2006 included $1.6 billion in education assistance to areas affected by hurricanes Katrina and Rita, and the Reconciliation bill would change the funding of student aid administrative costs from mandatory to discretionary in 2007. Taking into account these one-time changes, the President's 2007 discretionary request for education would be a decline of $2.1 billion, or 3.8 percent, from the comparable 2006 level.

Mandatory costs for the student loan programs and Vocational Rehabilitation State Grants fluctuate from year to year due to changes in inflation, interest rates, and other factors. The $22 billion reduction in mandatory costs from 2006 to 2007 reflects $17 billion in lower estimated student loan costs because of changes in interest rate and consolidation loan assumptions, the one-time $4.3 billion appropriation in 2006 to eliminate the cumulative Pell Grant funding shortfall, and $1 billion in student loan savings from changes in the pending Higher Education Reconciliation Act.

Federal funding makes up about 8.2 percent of the estimated $555 billion that America is spending on elementary and secondary education during the 2005-06 school year. The relatively small size of the Federal investment in education dictates an emphasis on promising, research-based programs that have the potential to leverage more effectively the much larger State and local share of national education spending to bring about real improvement in student achievement. This is the primary goal, for example, of the strong State accountability systems required by No Child Left Behind. Under the President's request, funding for NCLB programs would rise by more than $1 billion in fiscal year 2007, from $23.3 billion to almost $24.4 billion, an increase of $7 billion, or 40 percent, since NCLB was enacted.

The combination of discretionary and non-discretionary resources in the President's budget is focused on the following areas.

PREPARING AMERICA'S STUDENTS FOR GLOBAL COMPETITION

Despite the great promise and progress of No Child Left Behind, gaps remain in the Federal effort to improve the performance of America's public schools, gaps that increasingly are exposed by the rapid pace of technological change and increasing global economic competition. To ensure a strong and prosperous America in the 21st century, our students must possess the mathematics knowledge that is the foundation of our Nation's long dominance in science, technology, and innovation; graduate from high school prepared to enter college or the globally competitive workforce; and master critical foreign languages needed both for success in the global business arena and to ensure our national security in the war on terrorism. The 2007 request addresses each of these challenges:

• $380 million, as part of the American Competitiveness Initiative, for proposals to strengthen the capacity of our schools to improve elementary and secondary instruction in mathematics and science while complementing High School Reform efforts:

  • $125 million for the Math Now for Elementary School Students initiative, modeled after Reading First, to implement proven practices in math instruction—including those recommended by the National Math Panel—that focus on preparing K-7 students for more rigorous mathematics courses in middle and high school.

  • $125 million for a new Math Now for Middle School Students initiative, based on the principles of the Striving Readers program, to support research-based math interventions in middle schools.

  • $10 million for a National Mathematics Panel, which will be formed in fiscal year 2006 to identify key mathematics content and instructional principles to guide the implementation of the Math Now programs. The request for 2007 would be used to carry out the panel's recommendations, including research and dissemination of promising practices in mathematics education.

  • $5 million for an Evaluation of Mathematics and Science Programs proposal that would conduct activities to improve the quality of evaluations of Federal elementary and secondary mathematics and science programs, as well as to evaluate such programs, with a focus on examining whether they are consistent with the principles of NCLB.

  • A $90 million increase for Advanced Placement to bring a new emphasis on training teachers and expanding opportunities for students, particularly in high-poverty schools, to take high-level Advanced Placement and International Baccalaureate courses in math, science, and critical foreign languages.

  • $25 million for the Adjunct Teacher Corps to create opportunities for qualified professionals from outside the K-12 educational system to teach secondary-school courses in the core academic subjects, with an emphasis on mathematics and the sciences.

• $1.475 billion for the President's High School Reform initiative to support interventions and expanded high school assessment aimed at improving the academic achievement of students at greatest risk of not meeting challenging State academic standards and not completing high school. Related increases include:

  • $70.3 million for the Striving Readers program, for a total of $100 million to significantly expand the development and implementation of research-based interventions to improve the skills of teenage students who are reading below grade level.

  • $8 million for State Scholars Capacity Building under the Fund for the Improvement of Education to increase the number of States implementing State Scholars programs, which encourage high school students to complete a rigorous four-year course of study.

  • $60 million for Academic Competitiveness and National SMART Grants, for a total of $850 million to provide grants of up to $4,000 to an estimated 600,000 low-income, high-achieving postsecondary students who have completed a rigorous high school curriculum or are majoring in mathematics, science, technology, engineering, or critical foreign languages.

• $35 million for the Department's portion of the President's multi-agency National Security Language Initiative, to significantly increase the number of American students learning foreign languages critical for our national security and global competitiveness:

  • $24 million for a new Advancing America Through Foreign Language Partnerships program, which would establish fully articulated language programs of study in languages critical to US national security through grants to institutions of higher education for partnerships with school districts for language learning from kindergarten through high school and advanced language learning at the postsecondary level.

  • A $2 million increase for Foreign Language Assistance, for a total of almost $24 million for this existing program, to provide new incentives to school districts and States to offer instruction in critical foreign languages, such as Arabic, Chinese, Farsi, Japanese, Korean, Russian, and Urdu, in elementary and secondary schools.

  • $5 million for the Language Teacher Corps, which would provide training to college graduates with critical language skills who are interested in becoming foreign language teachers.

  • $3 million for a Teacher-to-Teacher Initiative that would provide intensive summer training sessions and online professional development for foreign language teachers.

  • $1 million for a nationwide E-Learning Language Clearinghouse to help deliver foreign language education resources to schools, teachers, and students across the country.

A NEW FOCUS ON IMPROVEMENT IN NO CHILD LEFT BEHIND

The 2007 request will fund the sixth year of No Child Left Behind implementation. With all the key elements of the law in place—including assessments in grades 3-8, strong State accountability systems, new choices for students and parents, and highly qualified teachers—States and school districts will increasingly focus on making the substantial annual improvement in student achievement needed to reach the 100-percent proficiency goal by 2014. In particular, States will need comprehensive, statewide systems of support to help school districts turn around low-performing schools that have been identified for improvement, corrective action, and restructuring. This challenge of continuous improvement will only grow as more school districts themselves are identified for improvement and corrective action. For this reason, the request includes critical proposals for strengthening Title I school improvement, while maintaining strong support for other key NCLB programs:

• $12.7 billion for Title I Grants to Local Educational Agencies, the same as the 2006 level, to maintain support for State and local efforts to meet the rigorous accountability and teacher quality requirements of the No Child Left Behind Act. The request also proposes to give States greater flexibility to reserve the full 4 percent of their Title I allocations required for LEA school improvement. Title I funding has grown by nearly $4 billion, or 45 percent, since enactment of NCLB.

• $200 million in first-time funding for Title I School Improvement Grants to support strong and effective State leadership in helping to turn around low-performing schools and school districts. States would have flexibility in using formula grants to establish or expand comprehensive, statewide systems of support for the continuous LEA and school improvement needed to meet NCLB proficiency goals.

• $408 million for State Assessment Grants to maintain statutorily required levels of support for development and implementation of the annual State assessments required by NCLB, including the science assessments that States will implement by 2007-2008. The total includes $7.6 million for competitive grants to improve the quality and reliability of State assessments, especially for students with disabilities and limited English proficiency.

• $55 million for Statewide Data Systems, an increase of $30 million, to expand support for State efforts to implement longitudinal data systems to monitor individual student performance to improve instruction and close achievement gaps, to increase State capacity for accurate reporting and use of high school graduation rates and dropout data, and to increase the capability of States to efficiently satisfy Federal reporting requirements through systems like the Education Data Exchange Network.

• $2.9 billion for Improving Teacher Quality State Grants to help States ensure that all teachers of core academic subjects are highly qualified and to strengthen teachers' subject-matter knowledge and teaching skills.

• $99 million for the Teacher Incentive Fund, first funded in 2006, to encourage States and school districts to develop and implement innovative ways to provide financial incentives for teachers and principals. This program will help close the equity gap in access to the best teachers and principals by rewarding those that raise student achievement, help to close the gap in achievement, and work in hard-to-staff schools, subjects, or rural areas.

• $1.0 billion for Reading First State Grants and $103 million for Early Reading First to maintain support for comprehensive reading instruction, grounded in scientifically based reading research, that enables all young children to read well by the end of third grade.

• $669 million for English Language Acquisition to support flexible, performance-based formula grants to help ensure that limited English proficient (LEP) students learn English and meet the same high academic standards as all other students. States must use a portion of their awards to increase the size of grants to districts that have experienced a significant increase in the percentage or number of recent immigrant students over the preceding two years.

• $163 million for Research, Development, and Dissemination to maintain support for ongoing initiatives critical to the success of the NCLB Act, including research on reading comprehension, mathematics and science education, teacher quality, and cognition and learning in the classroom, as well as a new program of field-initiated evaluations of promising education products and approaches to find out what works in the classroom.

MORE OPTIONS FOR PARENTS

The 2007 request would build on the expansion of parental choice in No Child Left Behind, which requires public school choice and supplemental educational services options for students attending schools identified for improvement, corrective action, or restructuring. While nearly all States and most school districts have made good-faith efforts to implement NCLB choice options, the reality is that there are too few alternatives in many districts for parents seeking a quality education for their children. The 2007 request would help increase the range of these alternatives through the following proposals:

• $100 million for a new America's Opportunity Scholarships for Kids program, which would provide the parents of students enrolled in schools identified for restructuring under NCLB—a school that has not met State progress goals for 6 or more years—with expanded opportunities to transfer their children to a private school or to obtain intensive supplemental services. This proposal would complement nearly $15 million in the 2007 request for the District of Columbia to continue funding opportunity scholarships for low-income students in DC schools.

• $26 million for Voluntary Public School Choice grants to give families better education options by encouraging States and school districts to establish or expand public school choice programs, including those providing choice across a State or across districts. The request would support a new competition focused specifically on increasing school capacity through inter-district choice strategies. Few districts have created inter-district choice arrangements under NCLB, limiting the effectiveness of the Title I choice provisions in many areas.

• $215 million for Charter Schools Grants, which would support approximately 1,200 new and existing charter schools. The request includes $15 million for the State Charter School Facilities Incentive Grants program, which assists charter schools in obtaining facilities by matching funds from State programs that make payments, on a per-pupil basis, to finance charter schools facilities.

• $37 million for the Credit Enhancement for Charter School Facilities program to maintain assistance for charter schools in acquiring, leasing, and renovating school facilities by encouraging public and nonprofit entities to provide financing through such means as providing loan guarantees, insuring debt, and other activities to encourage private lending.

SPECIAL EDUCATION AND VOCATIONAL REHABILITATION

The Individuals with Disabilities Education Act (IDEA) was reauthorized in late 2004 to improve educational results for students with disabilities by more closely aligning IDEA with NCLB in areas such as accountability for results, flexibility and reduced paperwork, enhancing the role of parents, and research-based instruction. By demanding greater accountability for the achievement of students with disabilities, NCLB is helping to complete the work launched by the IDEA 30 years ago, and is producing meaningful gains for these students in terms of reading and math performance, lower dropout rates, and higher enrollment in postsecondary education. The 2007 request would help build on these gains.

The request also maintains support for comprehensive and coordinated vocational rehabilitation and independent living services for individuals with disabilities through research, training, demonstration, technical assistance, evaluation, and direct service programs. Consistent with the Administration's multi-year initiative to reform the Federal government's overlapping training and employment programs, funds are not requested for 3 vocational rehabilitation programs in this account: Supported Employment State Grants, Projects with Industry, and the Migrant and Seasonal Farmworkers program. These programs provide services to individuals with disabilities that can be funded by the larger VR State Grants program.

The 2007 request for these activities includes the following:

• $10.7 billion for Special Education Grants to States, an increase of $100 million over 2006, and a total increase of $4.3 billion, or 69 percent, since fiscal year 2001. The request would provide an estimated $1,535 per student for more than 6.9 million individuals with disabilities ages 3-21.

• $2.8 billion for Vocational Rehabilitation State Grants, an increase of $117 million or 4.3 percent, which represents the amount necessary to satisfy the requirement to increase funding for the program by at least the percentage change in the CPIU for the 12-month period completed in October 2005.

POSTSECONDARY STUDENT FINANCIAL ASSISTANCE

In 2007 the Department of Education will administer over $82 billion in new grants, loans, and work-study assistance to help over 10 million students and their families parents pay for college. The request would provide nearly $13 billion for Pell Grants to more than 5.2 million students, or 60,000 more than the 2006 level. The budget also supports $66 billion in guaranteed and direct student loans. The 2007 request for student aid builds on a number of significant accomplishments in 2006, including the provision of $4.3 billion in mandatory funding to eliminate the multi-year funding shortfall in the Pell Grant program and put the Pell Grant program on a firm financial footing after years of growing fiscal instability.

The 2007 Budget also assumes enactment of the Higher Education Reconciliation Act (HERA), which is expected in early 2006, and which makes significant changes to the student aid programs, including several proposed in the 2006 President's Budget. These changes include:

• New, need-based Academic Competitiveness Grants and National SMART Grants. A new program would award Academic Competitiveness Grants of up to $1,300 to high-achieving first- and second-year undergraduate students who have completed a rigorous high school curriculum. Third- and fourth-year students majoring in physical, life, or computer sciences, mathematics, technology, engineering, or a critical foreign language could receive National Science and Mathematics Access to Retain Talent (SMART) Grants of $4,000 annually. Funded through mandatory appropriations, the program would provide $850 million in grants to 600,000 low- income postsecondary students in 2007, and an estimated total of $4.5 billion over five years.

• Eliminating origination fees on most student loans. These fees charged to students, currently as high as 3 percent, would be phased out beginning with a 1 percent reduction on July 1, 2006. By July 1, 2010, fees would be eliminated in the FFEL program and reduced to 1 percent in Direct Loans, with FFEL borrowers paying a 1 percent insurance premium after that date.

• Raising annual loan limits, beginning July 1, 2007, from $2,625 to $3,500 for first-year students, from $3,500 to $4,500 for second-year students, and from $10,000 to $12,000 for graduate students.

• Permanently expanding teacher loan forgiveness. The HERA permanently expands loan forgiveness for highly qualified math, science, and special education teachers serving low-income communities, while broadening the availability of this benefit for private school teachers.

• Adding a new, 3-year deferment for active military duty for FFEL, Direct Loans, and Federal Perkins Loans disbursed on or after July 1, 2001. During the deferment period, the government would pay the interest on such loans for borrowers serving on active duty, or performing qualifying National Guard duty, during a war or other military operation or national emergency.

• Capping special allowances when student interest rate exceeds guaranteed rate. Under current law, FFEL lenders receive the higher of the student interest rate or a statutorily guaranteed rate of return, called the special allowance rate. If the student rate is lower than the guaranteed rate, the government makes up the difference. Under HERA, for new loans made on or after April 1, 2006, when the student rate is higher than the guaranteed rate, lenders would be required to rebate the difference to the government.

• Restricting excessive lender subsidies by permanently limiting the ability of loan holders to retain higher-than-standard subsidy payments of up to 9.5 percent on loans funded with the proceeds of tax-exempt securities originally issued before October 1, 1993, while ending the practice of "recycling" loans for most loan holders.

HIGHER EDUCATION PROGRAMS

In addition to student financial assistance, the request provides continuing support for institutional development at colleges and universities serving large percentages of minority students, and funds opportunities for postsecondary students to gain international expertise and training as language and area specialists. Highlights include the following:

• $417 million for the Aid for Institutional Development (HEA Title III) programs to maintain support for institutions that help close achievement and attainment gaps between minority students and their non-minority peers, including Historically Black Colleges and Universities and Historically Black Graduate Institutions.

• $94.9 million for Developing Hispanic-serving Institutions to maintain support for postsecondary education institutions that serve large percentages of Hispanic students. This program is a key part of the Administration's effort to increase academic achievement, high school graduation, postsecondary participation, and life-long learning among Hispanic Americans.

• $106.8 million for the International Education and Foreign Language Studies (IEFLS) programs, an increase of $1 million to help meet the Nation's security and economic needs through the development of expertise in foreign languages and area and international studies. The additional $1 million is requested as part of the President's National Security Language Initiative to establish a nationwide E-Learning Clearinghouse to deliver foreign language education resources to teachers and students across the country.

ASSISTANCE TO AREAS AFFECTED BY HURRICANES KATRINA AND RITA

On December 30, 2005, President Bush signed into law the Hurricane Education Recovery Act, which provided $1.4 billion to assist school districts and schools in meeting the educational needs of students displaced by Hurricanes Katrina and Rita and in helping schools that were closed as a result of the hurricanes to reopen as quickly and effectively as possible. The Act also provided $200 million to help institutions of higher education that were directly impacted by hurricanes as well as other colleges and universities around the country that enrolled displaced students. In addition, the Department has made available $30 million in unspent Federal student financial assistance to help hurricane-affected institutions. Assistance under the Hurricane Education Recovery Act includes:

• $750 million for Immediate Aid to Restart School Operations, under which the Department is awarding funds to State educational agencies (SEAs) in Louisiana, Mississippi, Texas, and Alabama, which in turn are providing assistance to local school districts and non-public schools to help schools resume operation in areas affected by the hurricanes. The Department announced on the day the law was signed that it would immediately release $254 million of these funds to the eligible SEAs as a "first installment" of the Restart program.

• $645 million in Emergency Impact Aid for Displaced Students, which will make awards to SEAs to cover the costs of educating students enrolled in public and non-public schools who were displaced by hurricanes Katrina and Rita during the 2005-06 school year. The Department will use these funds to make four quarterly payments to SEAs based on counts of displaced students enrolled in public and non-public schools.

• $5 million in Assistance for Homeless Youth to provide a separate source of funding to SEAs to address the needs of homeless students displaced by Hurricanes Katrina or Rita. SEAs will subgrant funds to LEAs on the basis of demonstrated need, and LEAs must use their grants for activities authorized under the McKinney-Vento Homeless Assistance Act.

• $190 million to help rebuild institutions of higher education and assist displaced postsecondary students in Louisiana and Mississippi. Congress directed $95 million each to the Louisiana Board of Regents and the Mississippi Institutes of Higher Learning.

• $10 million for the 99 postsecondary institutions around the country that enrolled displaced students following the hurricanes.

BUDGET AND PERFORMANCE INTEGRATION

As part of the President's Management Agenda, the Administration developed the Program Assessment Rating Tool (PART) to assess and improve program performance and achieve better results. Each program receives scores for program purpose and design, strategic planning, program management, and program results, as well as an overall rating of Effective, Moderately Effective, Adequate, Ineffective, or Results Not Demonstrated.

Of the 74 programs in the Department assessed since 2002 using the PART, the Administration rated 2 programs Effective, 4 programs Moderately Effective, 21 programs Adequate, 6 programs Ineffective, and 41 programs Results Not Demonstrated (RND).

A rating of RND often indicates that a program has management issues because it typically identifies a lack of long-term goals, annual performance measures, or reliable data. However, program statutes often contribute by failing to give ED the necessary tools to demonstrate success: clear and measurable objectives; strong accountability mechanisms or other means of ensuring participants focus on achieving results; and mechanisms for gathering high-quality, reliable data on program outcomes. Outside of the annual budget process, to the extent possible under current law, the Department is working to improve the effectiveness of its programs. In addition, the Department hopes to work with Congress to improve program statutes by clarifying program objectives and measures and by strengthening accountability and data quality. In particular, full implementation of EDFacts, a centralized information management tool based on the Education Data Exchange Network (EDEN), will streamline the collection of timely, accurate program performance and student achievement data.

The President is continuing to focus taxpayer dollars on winning the War on Terror and protecting the homeland, and enforcing additional spending restraint elsewhere across the Federal Government. Given this spending restraint, the Administration is using the PART to ensure that limited resources, in the Department of Education and other federal agencies, are targeted toward those programs and activities most likely to achieve positive results.

In general, this means investments will continue to be made in programs receiving a PART rating of Effective, Moderately Effective, or Adequate, while most programs rated Ineffective will be proposed for elimination. For programs rated RND, the Administration is taking a careful look to determine whether the programs are likely to demonstrate results in the future. If so, the Administration will generally support continued funding along with management or legislative improvements. However, the Administration will propose the termination of RND programs that unnecessarily duplicate other activities or suffer from such major flaws in design or execution that they are unlikely to demonstrate improved performance in the future.